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You may associate subscription services with things such as magazines, gym memberships, and digital content services. However, the subscription business model has grown in tremendous ways in the past decade. It’s to the point that there is a subscription service for just about everything – from skincare, hobbies, food, alcohol, children’s goods, to home and garden needs, and much more. Then there are intangible subscriptions, such as SaaS and app-based offerings. Even brick-and-mortar stores are finding creative ways to offer subscription packages, such as hair salons that offer blowout subscriptions.

The options are endless, but past success of subscription services doesn’t necessarily guarantee the success of future subscription services. There are many insights that entrepreneurs looking to break into the space should know beforehand.

It’s More About The Experience Than The Subscription Itself

“Generally speaking, consumers do not necessarily love the idea of subscriptions off-the-bat. If anything, the requirement to sign up for recurring subscriptions often makes it harder for most companies to acquire customers. Consumers are only willing to subscribe to automated purchases giving them real benefits, such as savings in time and/or money,” says Jeff Minnichbach, Founder of No Limit Creatives, a flat-rate monthly subscription design service.

This goes to prove that it’s more about the experience than the subscription itself.

No Limit Creatives focuses on providing a great experience by helping businesses conquer their creative roadblocks through graphic and video design, typically covering everything a business needs in a month's time.

According to research by McKinsey, to continue subscribing, consumers expect personalized subscriptions to become more tailored over time. And recommendations, including word of mouth and positive online reviews, are a key trigger for consumers to sign up with a subscription service in the first place.

Consumers who sign up for product subscription services like the element of surprise and feel they are getting good value for their money. In contrast, access subscribers, which includes paying a monthly fee to obtain lower prices or members-only perks, place importance on convenience and personalization as a reason to subscribe. Replenishment subscribers, which include people who subscribe for items such as razors and diapers, seek greater convenience, as well as greater value.

By extension, an inferior experience leads to canceled subscriptions. Inferior experiences include the feeling of being ripped off, poor assortments or quality, and lack of personalization. In fact, the McKinsey study found that nearly 40% of e-commerce subscribers have canceled their subscriptions. And more than one-third of consumers who sign up for a subscription service cancel in less than three months, and over half cancel within six months.

In the case of subscription e-commerce providers, one of the biggest challenges is matching supply and demand; consumers are generally more likely to cancel or freeze subscriptions when products pile up, or when order volumes can’t be customized, such as when they are going on vacation and need less product in a given time period. This is why companies need to frequently solicit consumer insights and find out exactly what the consumer is looking for.

The Market Can Be Volatile

One of the biggest threats for subscription companies are existing retailers. “[When a retailer sees] a model that’s doing well, they have the inventory to do it themselves,” said John Fetto of Hitwise. The turbulent markets more or less indicate that winners and losers of the subscription economy are not yet defined. The market is wide open for anyone with a better idea and better execution to develop their business and become a leader, thereby overthrowing their predecessors. The bottom line is that the market is often volatile, and the players who know how to move faster and smarter will win the greater market share.

As the subscription e-commerce market continues to grow, novice entrepreneurs that are looking to get their piece of the pie need to be well aware of how to deliver on the experience that consumers are seeking. Subscription products or boxes offer a personalized, convenient, and often lower-cost way for consumers to buy what they desire and need. Companies in the space must create exceptional experiences, in addition to offering desirable products or services, to avoid high churn rates and accelerate their growth and profitability.

I am a documentary filmmaker and the CEO of Studio 15, a socially responsible fashion brand. After leaving behind a 15-year career in the corporate fashion world, I

…

I am a documentary filmmaker and the CEO of Studio 15, a socially responsible fashion brand. After leaving behind a 15-year career in the corporate fashion world, I started a company that focuses on doing good and supporting women.
It’s Studio 15’s mission to promote and collaborate with other female-owned businesses and to support female entrepreneurs in developing countries through a partnership with Kleos MFG, a non-profit organization.